Which would you choose? BRRR Vs Turnkey

[Israel Hernandez]

Scenario 

Both Homes are SFR 3/2 located in the same general area.

Property 1.

HARD money deal because of the competition... These properties fly off the shelves in CA.

Built in early 60's

Purchase price $90k 20% down

Rate 9% 30 year amtz PITI $723 mon No Pre Pay Pen

Market Rent $1200 mon

4pts Origination

Antoher 3-4k in escrow closing costs

About $10-15k in Rehab costs

Another $3-4k to refi out of Hard Money loan

ARV $145k maybe...

Property 2

Conventional Deal

Built in late 80's

Purchase Price $160k 20% down 

Rate 4.375% 30 year amtz PITI $856 mon

Market Rent $1350-$1400 mon

1pt Origination

$3-4 k in escrow closing costs

$0 rehab

Pretty Much Turnkey

Look forward to your feedback

Thanks 

Izzy

[Nicholas W.]

There really isn't enough info to give informed advice. One thing to keep in mind is that the rehab will take longer and cost more than you anticipate. With the first deal you will presumably have far more equity in it when you're done but it doesn't come without costs (4pts origination, $6-8k in closing costs.) With deal 1 you should have zero out of pocket after the refi but it comes at the expense of taking on a potentially risky rehab. Depending on what rehab is being done on deal 1 you may be able to avoid any real capex in the first 10-15 years that you may have with deal 2 which would really boost the cashflow early on in the investment. I'm assuming deal 2 will attract a better tenant given the higher rents so that's something to factor in.

Ultimately it all depends on what you're looking for and whether or not you want to take on a rehab. Do you have more cash than time or more time than cash?